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What has foreign exchange market intervention since the Plaza Agreement accomplished?

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Author Info
Michael Bordo
Anna Schwartz
Abstract

We review the conduct and scale of official intervention by monetary authorities in the U.S.A., Japan, and West Germany since the Plaza Agreement. Relative to trading volume and the stock of internatonally traded assets denominated in foreign currencies, intervention is small-scale and sporadic, hence at best limited to transitory effects. It does not appear to reduce volatility of daily exchange rates. Monetary authorities gamble that they will not suffer losses on their foreign currency holdings. Evidence in favor of sterilized foreign exchange market intervention as a way of conveying information to the private sector is far from convincing. Since changes in relative monetary growth rates are sufficient to alter bilateral exchange rates, monetary authorities can achieve their exchange rate preferences with domestic monetary policy, but at the cost of possible distortionary effects on monetary growth rates, domestic interest rates, and international capital flows. Copyright Kluwer Academic Publishers 1991

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File URL: http://hdl.handle.net/10.1007/BF01886134
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Publisher Info
Article provided by Springer in its journal Open Economies Review.

Volume (Year): 2 (1991)
Issue (Month): 1 (February)
Pages: 39-64
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Handle: RePEc:kap:openec:v:2:y:1991:i:1:p:39-64

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Related research
Keywords: monetary authorities; intervention; foreign exchange markets;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Dominguez, K.M., 1989. "Market Responses To Coordinated Central Bank Intervention," Papers 179d, Harvard - J.F. Kennedy School of Government.
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  2. Frankel, Jeffrey A., 1982. "In search of the exchange risk premium: A six-currency test assuming mean-variance optimization," Journal of International Money and Finance, Elsevier, vol. 1(1), pages 255-274, January. [Downloadable!] (restricted)
  3. Martin Feldstein, 1988. "International Economic Cooperation," NBER Books, National Bureau of Economic Research, Inc, number feld88-4.
  4. Mussa, Michael, 1979. "Empirical regularities in the behavior of exchange rates and theories of the foreign exchange market," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 11(1), pages 9-57, January. [Downloadable!] (restricted)
  5. Rogoff, Kenneth, 1984. "On the effects of sterilized intervention : An analysis of weekly data," Journal of Monetary Economics, Elsevier, vol. 14(2), pages 133-150, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alfred Broaddus & Marvin Goodfriend, 1996. "Foreign exchange operations and the Federal Reserve," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 1-20. [Downloadable!]
  2. Stephanie Guichard, 1998. "La politique monetaire et la crise japonaise," Working Papers 1998-06, CEPII research center. [Downloadable!]
  3. Thomas Willett, 1999. "Developments in the Political Economy of Policy Coordination," Open Economies Review, Springer, vol. 10(2), pages 221-253, May. [Downloadable!] (restricted)
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